DEG Panel: Transactional Business Still Hardy — and Poised for Takeoff

Despite being squeezed by the pandemic, the transactional business is still sturdy and is poised to take off once new releases in the pipeline grow from a trickle to a steady stream.

That’s according to Galen Smith, CEO of Redbox, and Eddie Cunningham, the former Universal Pictures Home Entertainment president who now runs Studio Distribution Services, the Universal-Warner Bros. disc distribution joint venture. The two executives spoke on a virtual DEG Expo panel March 24 moderated by Media Play News publisher and editorial director Thomas K. Arnold.

As industry pundits have observed, content in the transactional arena, which includes physical disc and digital purchases and rentals, dwarfs what consumers can find via subscription or other streaming services. That content has helped the transactional business survive recent jolts, the executives said.

Even the Blu-ray Disc and DVD business, which has been steadily declining for the last decade, remains a viable business, Cunningham said.

“In 2020 despite a pandemic and despite all the pressure of retail closures around the world … and pretty much no new releases after the first couple of months of the year — there’s still a $7 billion retail market, globally,” Cunningham said of the disc business.

“Obviously the last few months, there haven’t been that many new releases. But as that starts to come back in the second half of this year I think you’re going to see a real resurgence,” Smith added, noting that Redbox, with kiosk rentals driven by new releases, is looking forward to a more consistent flow of new content.

Cunningham said he’s been getting a similar message from the big retailers.

“Everybody’s incredibly excited about the new releases starting to come back into this business,” he said. “And I think we feel good about the fact that the big retailers … seem very, very committed to this category. We’ve got new titles every single week. We spend marketing money. We drive people into stores. We introduce fun. We introduce theater into the stores. … So a lot of them are pretty excited about us getting back into the new-release business. … Maybe we could even find a way of sort of growing this [physical] business or certainly hugely flattening the decline over the next year or two after the numbers we made during the pandemic.”

In the meantime, Cunningham said catalog has been picking up the slack, with such series as “Harry Potter,” “Game of Thrones,” “The Office” and even children’s stalwart “Curious George” selling well despite streaming availability.

“If content is available on subscription services, you can still sell a lot of content physically on those same franchises,” Cunningham noted.

“Then there’s a huge amount, about 40% of consumers, who’ve never ever until this day ever transacted digitally, so they’re a huge target for us,” he said, adding “I think physical’s going to be around for a long time to come.”

The disc rental business, which Redbox dominates with thousands of kiosks in the United States, is here to stay as well, added Smith.

“We obviously have a view that it’s going to be sustainable for the long term,” he said. “It’s a great value to consumers. It’s incredibly convenient. … The fact that we’ve got 41,000 kiosks around the U.S. really helps with that. I think what we’ve been able to do is augment that experience. We’ve got this massive loyalty program with over 37 million people in it, and so we’re rewarding them for behavior and then rewarding them with things like free content and so it gives up a great opportunity for us to reinforce that value ecosystem.”

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Redbox marketing makes sure to let consumers know when new releases are available and doesn’t discriminate between the different ways a consumer might access content. The company offers consumers both physical and digital transaction options, letting them choose.

“We’re communicating with them on a regular basis in terms of what are those [new release] movies, and again, however you want to watch it, physically or digitally, we can be there to serve you with that,” he said.

Even though the company is offering a digital alternative, physical transactions aren’t suffering, Smith noted.

“Even when our customers started to transact digitally, it didn’t mean they stopped transacting physically,” he said. “They actually started transacting physically more. It reminded them again of all these great new movies that are available.”

As head of the disc distribution joint venture, Cunningham said he’s tasked with creating efficiencies and providing a focus on the physical business. The joint venture’s mantra is “two plus two equals five,” to make a bigger whole from the combined parts, he said.

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“The coming together of Universal and Warner and other third-party distribution partners is going to enable us to do things like share boxes coming out of Technicolor, which in turn saves a lot of in-store labor, transport costs and so on,” he said. “I think we’re in a position to start maybe talking a bit more again about some front-of-store displays in some of these big retailers where we’ve lost that.”

Two plus two equals five also means finding ways to leverage the studios’ combined content.

“Over the next year or 18 months you’re going to see some amazing things coming out of [the joint venture],” Cunningham said. “There’s going to be huge opportunities on Middle Earth, DC, Bond, classic monsters. It’s actually the 90th anniversary of Dracula coming up, so we’ve got an opportunity around anniversaries. ‘Fast and Furious,’ ‘Jurassic,’ ‘Dune,’ ‘Halloween,’ there are huge opportunities to draft off these kinds of things.”

He also envisioned boxed sets of titles from different studios as an added bonus for consumers.

“We’re going to work incredibly hard to see how we can put the two studios’ content promotions together and make something bigger,” he said.

Redbox, too, is looking to combine the advantages of different businesses. In addition to its digital and physical transactional offerings, the company also has ad-supported streaming and even a content acquisition and production arm.

“In terms of Redbox Entertainment, we have a ton of data obviously about what actors work, what genres work, and so what we want to do is say, ‘OK, we’re seeing a little less product from the studios, let’s go ahead and buy it, acquire it, produce it ourselves,’” Smith said. “We’re basically making sure that we program to our consumers what we know they are going to want. And we’re agnostic so we’re releasing it across all the digital retailers and then we’re actually selling it to streamers as well on the backend. We just want to make sure there’s good content made for consumers.”

Family Video Launches Promo to #SaveTheVideoStore

As it struggles during the pandemic, Family Video, the last major video store chain, is launching a promotional campaign called #SaveTheVideoStore to drum up consumer support.

With the help of studios and Hollywood talent such as Clerks director Kevin Smith, Family Video is bowing the campaign to celebrate physical media and generate nostalgia for the video store.

“Our plan with this campaign is to not hide from the stark reality that our business has been affected by streaming, COVID and just about everything else this year,” said senior brand manager Derek Dye. “We are hoping to pull at the heartstrings of physical media fans, video store fanatics and movie lovers as a whole to support us in this difficult time for our business.”

The campaign runs Nov. 9 to 22, boosted by a video of support for the chain from Smith, whose Clerks famously included scenes at a video store. But the major push is at the store level.

“We are going for a very grassroots initiative with our stores making signage, posters, painting the windows of our stores to get the word out,” Dye said. “We think that strategy along with the help of media outlets could help us immensely to drive traffic and awareness to our stores.”

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Battered by the pandemic and other hardships, the chain has shut down about 200 of its approximately 500 stores. It now has 300 stores in 17 states.

“It’s been a difficult year,” Dye said.

The nostalgic nature of the video store has not been lost on pop culture, even at a streaming service that is supplanting it, Netflix. Family Video has figured in previous seasons and will be featured prominently in the next season of Netflix’s “Stranger Things.”

Family Video T-shirt

The chain has been successfully selling Family Video retro-looking T-shirts to supplement income and capitalize on the nostalgia for video stores. Family Video has sold more than 700 of the T-shirts at $19.78 (1978 was the year the chain was established). In support of the new initiative, the chain is also selling a new  #SaveTheVideoStore shirt.

“Everybody has a fun memory of video stores,” Dye said.

He hopes the public will get the message that this institution is in trouble and needs fans to come in and support it.

The plea of the campaign, Dye said: “We need your help to save the video store.”

Iconic Video Store and Film Nonprofit Vidiots Relaunching in L.A.

Vidiots, the iconic L.A. video store-turned-film nonprofit, will relaunch in fall of 2020 as an expanded entertainment, social and community space with an adjacent video store in a new home at the historic Eagle Theatre in Los Angeles, according to the Vidiots Foundation.

Restoring the 90-year-old, 200-seat Eagle Theatre as an independent theater with state-of-the-art sound and projection (35mm and DCP), Vidiots will offer a program of repertory titles, new independents, hard-to-find gems, classics and community-driven programs. An adjacent storefront will house Vidiots’ 50,000-plus DVD, Blu-ray and rare VHS collection for rental. The location will also have a multi-purpose, second screening room for film programs, educational workshops, and special events.

Vidiots is currently fundraising and identifying Cornerstone Donors and Corporate Partners for naming rights and is also inviting First-In Founding Members. Founding Members to date include Katie Aselton and Mark Duplass, Jess Wu Calder and Keith Calder, Emily Cook, Mackenzie Davis, Rian Johnson and Karina Longworth, Phil Lord, Nate Moore, and Morgan Neville. Vidiots friend and supporter Jason Reitman is donating a 35mm projection system.

“Vidiots relaunching on the cusp of our 35th birthday is a triumph for Los Angeles film history and cements the legacy of Vidiots founders Patty Polinger and Cathy Tauber as innovators in L.A. film culture,” said Vidiots executive director Maggie Mackay in a statement. “Bringing the Eagle Theatre back and providing L.A. with a long-needed new film space is thrilling. We’re deeply grateful for our valued programming partners present and future, our expert advisors, and especially our First-In Founding Members whose generosity and passionate belief in our mission have made this relaunch possible. Vidiots at the Eagle is a community space created by and for film lovers and filmmakers. We welcome and encourage everyone who believes in our mission to join us as we work towards opening in fall 2020.”

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“Los Angeles should have more movie theaters, not fewer, and Vidiots has come to give all us punch drunk film lovers another place to call home where we can roam the racks. Thank you! So grateful to be a small part of this evolving institution,” said Reitman in a statement.

“We’re thrilled that Vidiots is moving into this next chapter and that our unique library of films will once again be made available to the public, especially in this era of streaming where choices are increasingly limited,” said Vidiots founders Polinger and Tauber in a statement. “Vidiots at the Eagle Theatre is a truly exciting and ambitious plan that revolves around our commitment to archival preservation, education, and accessibility, while maintaining and growing our passionate community of film lovers.”

“When we first moved in together and merged our belongings, we became a two-VCR family — and this was in 2013,” said Longworth and Johnson in a statement. “VHS and video stores were integral to both of us becoming who we are, and we couldn’t be happier to support the evolution of Vidiots and its media library. In a world remade by streaming, it’s never been more important to preserve access to physical media for all.”

“Their efforts towards creating community and preservation made Vidiots legendary in L.A. and I’m so excited to see their philosophy and energy reincarnated in a brick-and-mortar film space on the East Side. I can’t wait to spend all my time there,” said Davis in a statement.

Recently, Vidiots launched a programming partnership with Alamo Drafthouse L.A. with the series “Tales From the Video Store.” Vidiots is currently presenting a monthly 16mm series with Projections at the Bootleg Theater. New programming partnerships with The Black List, The Bob Baker Marionette Theater, and Cinema Eye Honors will launch in late in 2019/early 2020.

Future programming and partner organizations include Art House Convergence, Film Independent, Los Angeles Film Critics Association, Outfest, Oxy Arts and the Occidental Media Arts & Culture Department, Sundance Institute, UCLA Film & Television Archive, Women in Film, and Vidéothèque.

Vidiots was opened as an alternative video store in 1985 by L.A. natives Polinger and Tauber. For 32 years Vidiots served its community via the iconic Santa Monica storefront, which shuttered in 2017 in the wake of rising costs. With the support of Megan Ellison’s Annapurna Pictures (which became a major donor in 2015, along with Vidiots customer Dr. Leonard Lipman), Vidiots was able to store its collection and devise an extensive plan for sustainable relaunch in a new home.

The Eagle Theatre in the 1970s

Vidiots’ new home, originally conceived as a vaudeville stage, first opened in May 1929 as The Yosemite Theatre. After a few short days, the Yosemite re-opened as an independent silent movie theater, and a year later it transitioned to sound. In 1940, The Yosemite became The Eagle Theatre. From 1976 to 1979, the theater ran as a Pussycat, part of the adult cinema chain. In 1983, The Eagle once again became a traditional independent cinema, and operated into the 1990s before becoming a series of churches.

With almost-10,000 square feet of entertainment and educational space, Vidiots will operate seven days a week and offer daily screenings and special programs, the full video store with DVD and Blu-ray rentals, concessions, and a light menu with beer and wine. The main theater (200+ seats, a stage, 35mm, DCP, and state-of-the-art sound) will host screenings and tastemaker events. A second, smaller screening and event space (approximately 50 seats with DCP projection) will host screenings, workshops, and receptions.

To make a donation and sign up for email updates, visit vidiotsfoundation.org.